Scandia CEO could face embezzlement charges

Insolvency administrator discovers the bankrupt company broke ethical guidelines by using its clients’ deposits to run the business

Scandia Housing CEO Peter Høyer may face up to eight years of jail time for financial misconduct prior to the property management agency’s declaration of bankruptcy two weeks ago.

According to financial daily Børsen, the insolvency firm handling the bankruptcy discovered that Scandia Housing's management did not separate their clients' deposits from the money used to run the business.

As a result, Scandia Housing has had its membership in the property federation Ejendomsforeningen Danmark terminated as the federation's ethical guidelines state that members must not mix their own funds with those of their clients.

“We have an ethical principle which states that administrators must keep their own and their clients' funds completely separate,” Ejendomsforeningen Danmark's managing director, Torben Christensen, told Børsen, adding that Scandia Housing signed an agreement in 2012 agreeing to this practise. “According to the insolvency administrator this didn’t happen.”

According to law professor Lars Bo Langsted, Scandia Housing’s use of their clients' funds to run its business could be considered embezzlement. If the company was to be found guilty of embezzlement, it could lead to an eight-year prison sentence for Høyer.

“Generally speaking, if you are given funds by other people that you have to look after, you are not allowed to use them,” Langsted told Børsen. “You can’t mix them together with your own funds. If you do, it can be considered embezzlement.”

Høyer, however, denied any financial misconduct.

“As far as I’m aware I have not hurt or cheated anyone or deliberately done anything wrong,” Høyer told Børsen.

Børsen reported that over 300 Scandia Housing customers risk losing a combined 30 million kroner as a result of last week’s bankruptcy declaration.

Høyer has stated that the company suffered from a lack of liquidity and difficulty borrowing, which resulted in the bankruptcy. Nordia Advokatfirma has been called in to act as the insolvency administrator and is currently attempting to sell off the healthy parts of the business.

Housing spokesperson for the Konservative party, Benedikte Kjær, said that the case demonstrates a need for better regulation of the letting market.

“The company has used ordinary people’s deposits and left behind an enormous debt,” Kjær said. “We are prepared to look at the letting laws and follow England’s example and demand that deposits sit in separate, inaccessible accounts.”

Concern about the fate of Scandia Housing had been building for several months as increasing numbers of clients reported being owed money by the company.

A month before the bankruptcy, Høyer told Newspaq: "As far as I’m aware we’re not on the verge of closing […] and if anyone would know, I would.”

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